Friday 17 October 2008 19.01 EDT
First published on Friday 17 October 2008 19.01 EDT

Fresh allegations of misconduct were made against arms company BAE yesterday as the government was condemned for failing to clamp down on corruption. It was disclosed that the Serious Fraud Office (SFO) has accused BAE of concealing the truth about its Saudi arms deals in order fraudulently to get government insurance cover.

International anti-bribery monitors from the OECD published a report detailing allegations made during the aborted investigations into BAE's £43bn Saudi arms deals. BAE got insurance for the deals from the export credit agency, the ECGD. It is alleged that BAE concealed from Whitehall the existence of agents and intermediaries to whom it was making secret payments at the time.

SFO representatives told the OECD there had been "alleged bribery-related fraudulent misrepresentations by BAE to ECGD". The SFO witnesses told the French and Canadian investigators that "they had supplied to ECGD the evidence of bribery-related fraud against it ... involving alleged misrepresentations by the company to ECGD in connection with the issuance of insurance". But the export credit agency had done nothing, according to the report. The OECD monitors said: "The SFO indicated that it considered that it was up to the ECGD to determine what to do."

ECGD officials refused to tell the international monitors why they had taken no action, claiming they were bound by "commercial confidence". The OECD team said they were "seriously concerned by the lack of evidence of any response by ECGD to the fraud allegations".

BAE last night refused any comment on the substance of the allegations. The company said: "At no time has the SFO put to the company any allegation of wrongdoing in respect of the company's obtaining of ECGD cover in relation to the Kingdom of Saudi Arabia, nor has it advanced to the company any evidence."

The detailed analysis in the 75-page OECD report puts British ministers in the dock. The authors, in a team chaired by Swiss law professor Mark Pieth, condemned the UK's alleged tolerance of corruption.

The working group, which monitors whether Britain is abiding by an international anti-corruption treaty, said it was "disappointed and seriously concerned" by British official behaviour.

The report focused on Britain's repeated failure to make good its promises to pass an effective anti-corruption law, as well as the international uproar when the former prime minister, Tony Blair, forced the Serious Fraud Office to drop its investigation into secret payments made by BAE, the UK's biggest arms company.

Straw said he welcomed the OECD's contribution to the debate but failed to make any specific commitment to a timetable for a reformed anti-corruption law. The law commission is due to report again on the subject next month, and Straw said a draft bill would be published.

The OECD report accused the government of spending the last six years promising to reform the law, but never doing so. Yesterday's report picked out a few signs of minor improvement in British conduct, but systematically dismantled British excuses for never prosecuting any major corruption cases.

The Liberal Democrats, the only major political party not implicated in charges of collusion with past bribery on arms deals, last night joined anti-corruption campaigners in welcoming the findings: David Howarth, their justice spokesman, said "This is a devastating report."